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Updated Research Report on Liberty Interactive

On Mar 25, 2014, we issued an updated research report on Liberty Interactive Corp. . Despite reporting weak financial results, we believe that the company’s TV home shopping business will continue to flourish. The QVC segment has transformed itself into a powerful global brand, which may boost Liberty Interactive’s revenues in the double-digits.

Liberty Interactive has delivered negative earnings surprise in all three quarters last year, with an average miss of 17.60%. The company reported weak financial results for the fourth quarter of 2013, where both its top and bottom line missed the Zacks Consensus Estimate.

Liberty Interactive’s QVC division is benefiting from the surge in online sales. Management stated that its online sales will constitute more than 50% of the total revenue in the U.S. by 2014. The major thrust is coming from the growing adoption of high-end smartphones in the U.S. QVC has launched a synchronized content for its mobile applications. This feature allows smartphone users to get real time information about a product which is broadcasted on a TV show. This will promote online sales further.

After Amazon.com Inc. (AMZN - Free Report) , QVC is the second-largest e-Commerce retailer in the U.S. Liberty Interactive holds approximately 38% of HSN Inc. (HSNI - Free Report) and about 22% of the equity and 57% of the total votes of all classes of TripAdvisor Inc.’s (TRIP - Free Report) common stock.

Through 12 channels in eight countries, the company covers 300 million homes. Recently, the board of directors of Liberty Interactive raised the share buy-back program by $1 billion. Such a move will boost shareholders' value moving forward.

For the first time, the company’s e-Commerce business in the U.S. accounted for 50% of the total revenue in Dec 2013. Moreover, in the U.K. and Japan, orders placed through mobile accounts represented over 50% of the total orders placed during the reported quarter. Exposure to international markets, such as Japan, Germany, Italy, and the U.K., will enable QVC to achieve a high rate of growth.

On the flipside, Liberty Interactive’s businesses are susceptible to rapid technological changes. Large cable TV operators are increasingly deploying digital TV networks, which is gaining huge market traction. This may adversely impact the channel positioning of Liberty Interactive’s networks.

Increasing deployment of personal video recorders, video-on-demand technology, and IPTV network are systematically changing the distribution and viewing habits of the common people. These fundamental changes are taking a toll on the home shopping networks. Moreover, the home shopping and Internet retailing market place are getting competitive day by day.

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